Mutual Fund Investing

Mutual Fund Investing Facts

Do you understand Mutual Fund Investing?. You may be a savvy investor in the stock market or not, but you’ve probably heard the term Mutual Fund. A few years back knowing nothing about the workings of stock investing was more common. That can lead to losing some of your hard-earned money in the markets.

Mutual funds are collections of stocks and bonds owned by a group of people rather than one individual investor. This will make it a more advantageous since it allows investors to buy with less money than it would take to purchase the same amount on their own and it spreads the risks among groups of people.

The performance of a mutual fund depends mainly on the efficiency of fund managers who manages a portfolio of stocks on behalf of investors. Making informed decisions, choosing a rated and well-performing fund manager is critical to your financially future in the green mutual funds market. So its critical you understand the basics points of Mutual Funds Investing.

Its true that there is really is no strategy invented in investing that is completely safe and without risks. Mutual funds, however can have lower risks than many other investment options, that makes them attractive for those who lack the skills in investment markets. Fact is, mutual funds have much better rates of return than the average savings account and the risks are minimal in this type of investment, compared to other riskier options.

There are basically three types of mutual funds with some variations on each.

  • Money market funds. These funds are great for the long-term investor who have a slow and steady approach to investing that are better than leaving your money in interest-paying savings account.
  • Equity funds that provide slow growth over time with a little income along the way. 
  • Fixed income funds that are created to provide a current income over time. This is great for those who have retired or investors that are extremely conservative.

Diversification is one of the key ingredients of a healthy portfolio and energy mutual funds will help you get diversified in a broader way. If you’re young and just beginning your career and in no real hurry for retirement, this is the one of the best ways to invest your money for the long term. But with most mutual fund investing you do not have the high payoffs that many investors will seek to include for their retirement planning.

Stock Trading Golden Rules

To be successful in stock market, you need to prepare few guidelines. If you follow these guidelines consistently, you will make money with stocks. Obviously you will most likely lose your money if you break your own rules. So my suggestion is to follow these rules no matter what.  People might suggest you to go for Stock trading software as an easier route.  However sticking to your own share trading rules will certainly be worth during the long run, it is the discipline that will help you make big profits. So look at these rules  before you enter the stock trading.

Stock Trading Guideline No 1: Be an Expert at a trading style.
Different people will have different stock trading styles. Do not try to do them all. You keep improving and practicing at the one style of share trading that is most suitable for you. Do not hop from one trading style to another. You should master one trading style  rather than trying to make poor attempts at implementing numerous method.

Stock Trading Guideline No 2: Never risk over three percentage of your total portfolio on any single share.
Protecting your primary investment is vital if you want to be in stock trading for long time.  Keep in mind that you are not trying to acquire the firm, you are just trading their stocks to make profit.

Share Trading Guideline No 3: If market goes against you, cut your losses at maximum of 15%
A very important rule. Many traders commit the mistake of holding a losing trade while smart people will minimize their loses and move on. The most important rule here is to place stop losses and reduce your losses if your assumptions went incorrect. Stick to your stop loss point and analyze the performance of your stock.

Stock Trading Guideline No 4: Always set price targets.
Before share trading have price targets. Don’t be too greedy and try to get the most out of rising share price. A stock price can rise steeply too quickly and can also fall too drastically.

Stock Trading Rule No 5: Don’t break the rules.
Like I mentioned before you must stick to the rules to attain money in share market.

Similar guidelines are applicable in foreign exchange market as well. You have automatic forex trading robots like Forex Megdroid, though sticking the rules is the key to success.

What To Do If A Trade Goes Against You

Trade Goes Against You

Expecting a miracle? It probably will not happen. This article is written to deal with trying to trade out of a losing position, NOT to ignore stop losses. Ignoring stops is the surest way in the world to take all the money in your account and just flush it down the toilet. I am serious. While that might help you in the short run eventually there is a 100% chance you will have a massive loss, like 50% or more on your money lost that is invested in the trade if you don’t use a stop. In addition, you will accumulate a portfolio of losing positions and have no more money to trade with. Every huge loss starts with the trader refusing to take a small loss – often times as a result of taking a loss or a stopout and then watching the stock turn in their favor. So the thinking is “They are not gonna get me this time”.  This is how traders learn to trade with bad habits.

The first thing to realize, there are 4 reasons losses that can happen when you are in a day trading or swing trading.

1. Timing is off on the entry
2. The direction you think the stock will move is just wrong
3. News items come out and move stock or index against you
4. Your price target to exit is too far away

We will address these one by one.

1. Timing is off on the entry

If your entry timing is off, this usualy means the price will move a bit in your favor, then against you within the first 5 to 10 minutes. The amount the price moves against you will be way more than any profit so far, but it does not go to the stop area either. This can be identified by the price hesitating and moving up and down, just below your price for long or just above for short. It should not make a beeline against you and it should not go right near your stop in the first few minutes.

The easiest way to deal with this happening is to assume that your timing is going to be off. Enter long or short only one half to two-thirds the actual size you want in a position where you think the timing is right. To make sure this never happens, do not use market orders. Place a limit slightly below the current market quote, most of the time you will have no trouble getting filled. Obviously you need to be aware of the trade type – if it’s a breakout and you don’t think you will get filled if you don’t use market, then for sure just go in. Most trades will not just run immediate, including breakouts. Once you receive a fill back, make sure you place an initial stop loss for that position. Wait a few minutes and see what the stock price does. If it runs in your favor immediately, well then your timing was perfect – trade what you have OR look for the remainder on a small dip.

Most of the time the best deal is to stick with day trading what you have. If the stock moves against you more than for you in the first 5 minutes, but is not a beeline against you (meaning it looks like the trade will stop out etc), then put in an order to add at the low of this 5 minutes (for long) or the high (for shorts). If you are an aggressive trader, you can put in some additional orders and press bets above the high for longs or below the low for shorts. If you are not able to get filled on your better price add shares, the press bets additional shares will usually work out because this means there is not much selling. If the price moves so that you can add at a better price, then make sure you cancel the press bets add shares. If you get filled on your additional shares, you can move your stop down slightly but increase to include all shares OR just place a separate stop on teh add. If you get the press bets add, move your initial stop up to just below that low of the 5 minutes, and make sure you increase the shares.

2. You are dead wrong on the direction

This often happens to even the most seasoned traders. You try a breakout that fails, you try to catch a turn at the bottom of a downtrend, you think a stock will follow another stock with bad news down … the common element is you are dead wrong. Usually these types of trades will be self evident from the get go – meaning within a few minutes its already far further against you than it ever went for you AND it does not oscillate. By this I mean the upside is severely limited (for longs) or downside limited (for shorts). This means it can move easily one direction, but really, really struggles in the direction you bet.

Usually if you see this happening, the only chance you have is to try to double down near your stop. You are looking to risk another 15c to 20c on double size, betting it will turn in your favor before you stop out. If you want to attempt this, care must be taken to use discipline. Do not try to force making money on the trade. The thinking is to try to minimize the loss by catching a turn near the stop area, with minimal risk on the add. If you can cut the loss in half or even get to even, get out. Move on to the next trade.

If you doubled down and actually caught the turn, you would want to move the stop up on all to just below the turn. When the price moves halfway back from your secondary add position to the price of your first entry, sell the additional shares so you are left with only your original position. On the additional shares you want to keep you stop to just below that entry. The theory is the side that was pushing the price so far against you finally got washed out, so give the rest a shot. Because you made a bunch back with the added shares, if you get stopped you will lose less than if you did not do that. It is your call to decide if that is the best thing or to just exit all of the position with a minor loss and move on.

3. News events happen in real time and can cause the stock or index to move against you sharply

This is arguably a tough situation. Not only do you have to be able to read and analyze the news very quickly, you must decide what impact it will have on the stock price. The call is would this type of news cause the stock price to go far enough to hit the stop level? If the answer is probably yes, exiting at market before the stop will save you money. If you think there is a chance the news would not stop you out, the plan is to exit the position on a counter move the other way. Most of the time there is no good way to add shares to trade out of a news play where you get caught. Occasionally the market will react in way A, but a few minutes later they realize they are wrong (or someone made a bad assessment, and the market is changing its mind) and react in way B. If you can uncover and notice that this will probably happen, the add point is the high of the bar where the news came out. Most of the time that will run any stops and trap traders playing the news as a quick trade, forcing them out.

4. Your price target to exit is too far away

This is common to. You have to kind of guess based on how the stock has been trading, localized volatility, and support resistance points where a price move might go to. It is very common to think it can move to A, but it struggles to get to even half of A. Usually these types if you don’t monitor them real close will turn into losing trades. The main reason is a scale up seller (for long bets) or scale down buyer (for short bets) is betting the other direction and absorbing a lot of the volume.

Most chart setups will attract trader attention and the more obvious a trade looks but does not work or really struggles, the bigger th indication is to get out immediately. Some of these can result in a huge move the other way because they trap lots of short term money in the stock trying to trade whatever setup happened. There is no real method to add to work your way out of it, you really just need to pay attention. If the stock appear
s weak (meaning it should be going up but its not) and you think you should exit – usually this is the right thing to do. Your instincts are telling you something important – for the trade setup, the stock is not trading like it. Getting out is the best solution because you are looking to avoid your stop getting hit and saving a bigger loss. Also realize if you exit early, and then see it was a mistake, you can always get back in with a click of the button.

Do not expect to make money on every trade, its simply not possible – you have to pick your battles. If you sense something is off or wrong and you are at a loss, take the loss and move on. Sticking around and trying to always make money will actually result in bigger losses eventually. You can think of the God rule (just a catchphrase) – When a trade goes wrong, (God) gives you one chance to get out – it’s up to you to realize the chance and take it.

Forex Pips Secrets

Learn Forex Pips Secrets

Here is an useful Forex Pips Guide from a cool forex website.

When you start looking for currency exchange articles, you will quickly observe references to the forex pip. Your gains and losses will be determined in pips. another thing that is measured in pips is the spread, the difference between the bid and ask prices which is the main cost of FX trading and how the forex brokers create their money. Hence it is obviously very  significant to know what is a pip.

The word is an acronym standing for percentage in point (otherwise, price interest point). It is the least increment of changes in values. It allows us to evaluate a climb or fall in currency rates in percentage terms as an alternative of dollars and cents.

What should we use Pips instead of dollars? The logic for this is clear. In the foreign exchange market there is no world currency in which to define prices. The United States Dollar may be the most generally traded currency but it is not drawn in in all trades. If you are trading cross rates, i.e. two extra currencies such as EUR/GBP or any other pairs that does not involve USD, it would not make any sense at all to state your profits and losses in terms of United States dollars. as an alternative, we require something that is a small percentage of the value of whatever currencies we are trading with.

This means that the monetary value of a pip varies according to the currency pair. Even if you are making use of the best forex trading software you need to have a very good knowledge about pips.

nearly all currencies are quoted to 4 decimal points. For illustration you might notice the bid price for EUR/USD quoted at 1.3641 and ask price 1.3645. The change (the spread) is 0.0004 or 4 pips. In this case a pip is 0.01% of a lot.

accordingly if the lot size was $100,000, one pip would be worth $10. For a lot size of $10,000, one pip would be US$1.

That is the worth of pips when the US dollar is the quote currency, i.e. XXX/USD. But when the quote currency is different, one pip is commonly ten units of that currency (e.g. 10 euros or 10 pounds). Or if your lot size is 10,000 units, one pip is 1 unit (1 euro or 1 pound).

The Japaense Yen is an exception which has a much lower unit value than most currencies (you get a lot of yen to the dollar). For this reason of this, the yen is only quoted to the second decimal point. You might see a price USD/JPY 110.12. In this case one pip is 0.01 or 1% but in yen, not dollars. So the pip value is JPY 1000 which at that price would be worth US $11.012.

These numbers can be confusing when you are a beginner at currency trading. So it is better for beginners to trade consistently with just one forex currency pair.

When you trade in one pair repeatedly every day you will soon get used to how much a pip means in terms of your actual gains and losses in your account. You will understand how much one pip is worth in dollars or in your own currency.

But when you are are doing forex trading quite a few different currency pairs, you have to deal with pips of diverse values. If you get baffled, you could be taking greater risks than you intended or closing trades with less gains than you thought. It is much easier to deal with just one pair initially until you have a sound understanding of trading practices and forex pip values.

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